Capital Goods: November 2013

Help wanted: jobs creator, a real one

I read that N.C. State University economist Mike Walden predicts the state’s unemployment rate will drop by 2 percentage points next year. His forecast came before the federal government shutdown, so we should cut him some slack if his numbers miss the mark. My immediate thought about this had less to do with the federal government and more to do with the state’s, my bailiwick. That thought: The crowd in charge in Raleigh better hope he is right.

An oddity of the jobs numbers is how much attention politicians pay to them despite having so little control over them. Awhile back, Don Carrington, executive editor of the John Locke Foundation’s Carolina Journal (and colleague of fellow Business North Carolina columnist John Hood), detailed the machinations in the administration of former Democratic Gov. Beverly Perdue regarding the state’s monthly jobs report. He questioned whether federal law had been violated by the Bureau of Labor Statistics sharing draft numbers with the governor’s office. I found far more fascinating his findings, based on emails, on how much sweat flowed to fashion a few lines of a press release. Perdue’s people didn’t recognize that, no matter how pretty the words, hard numbers cannot be hidden.

All that effort can be explained by the fact that the public holds the political class responsible for the economy. We need someone to blame, right? Politicians bring some of it on themselves. When a big company comes to town, state leaders crow about it as if the decision was due expressly to their personal charm. At the other extreme, when bad jobs reports come out, politicians in the opposing party pounce, making sure everyone knows that this didn’t happen on their watch.

The reality is that states move mostly with prevailing regional and national economic winds. In 2008, when investment bank Bear Stearns & Co. went belly up, no governor could stop the chain of events that caused pain in every state. When low-skill textile jobs began moving overseas in the 1980s, all Southern states took a hit. Pols could talk about retraining workers and recruiting new jobs; they could not bring back the old ones. At the national level, policymakers control monetary policy. But that is no substitute for the strange brew that generates consumer confidence or sparks economic innovation. At the state level, levers for immediate economic relief are limited. Policymakers can change their recruiting strategy. They can hire a smart marketing firm. But they can’t buy a printing press and start manufacturing dollars.

If it sounds like I am dismissing the ability of state leaders to influence economic growth, I’m not. They can, and have, created policies and made investments with long-term effects on job growth. When in the 1960s and ’70s they invested heavily in the UNC system and committed the state to low tuition that attracted bright students, that surely helped drive economic growth in the 1980s and ’90s. The same goes for putting tax money in one of the country’s most extensive state-supported road networks.

Today, they’re counting on their recently enacted tax overhaul to bring the state out of its economic funk. Republican Gov. Pat McCrory has said as much, arguing that lower corporate- and personal-income taxes make the state more competitive. So have GOP legislative leaders who pushed through the tax rewrite. Some of those same lawmakers tout their plan to open the state to hydraulic fracturing and drilling for natural gas as another means to economic Shangri-La. Earlier this year, one state senator talked about putting North Carolina “on track for a vibrant energy jobs sector.”

Even if they are right, even if those changes do affect the state economy in positive and significant ways, nothing is going to change overnight. Twenty companies with 2,000 employees each in South Carolina and Georgia aren’t going to relocate here soon because of North Carolina’s new tax code. Gas drillers aren’t going to flock here in huge numbers, passing out jobs to unemployed construction workers the moment the state starts issuing drilling permits. Meanwhile, the public is still going to look to blame someone for an unemployment rate that, at 8.7% in August, was among the worst in the country.

Those being eyed better hope that the economist is right. For the time being, hope is all they have.

Scott Mooneyham is editor of The Insider, www.ncinsider.com. Email him at smooneyh@ncinsider.com.